However, the market appears to be underappreciating the miner’s effort to diversify its resource base through the acquisition of
Apex Minerals
’ Gidgee gold project.

Buying Panoramic now will effectively give investors a free option to the gold asset. And gold stocks have generally enjoyed a bit more interest in 2011 as investors, spooked by the European debt crisis, flock to the relative safety of the yellow metal.

The miner bought the Western Australian project for $15.5 million in January.

Management said it was targeting to start production within two years after undertaking a scoping study and drilling program that has unearth encouraging results.

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The project has 310,000 ounces of gold in resource and the drilling results have underscored the potential for significant exploration upside, but UBS noted that investors have ascribed no value to Gidgee.

Assuming that the expansion of Gidgee will cost between $30 million to $60 million, and a 5½-year mine life on a cash cost of $US770 to $US890 an ounce of gold, UBS estimates the project will have a net present value (NPV) of $46 million if it produces 50,000 ounces of gold a year.

The NPV estimate jumps to $91 million if the miner can lift annual production to 75,000 ounces, and $110 million on production of 100,000 ounces a year.

The vast majority of brokers polled on Bloomberg, including UBS, are urging investors to buy the stock with an average broker price target of $1.85 a share.

The stock lost a further 2.26 per cent yesterday to close at $1.30, after shedding 4.3 per cent on Tuesday.

This means the stock is trading below even the most pessimistic broker target price of $1.35 a share.